Braemar Shipping Regulatory News (BMS)

THE INFORMATION CONTAINED WITHIN THIS ANNOUNCEMENT IS DEEMED TO CONSTITUTE INSIDE INFORMATION AS STIPULATED UNDER THE MARKET ABUSE REGULATION (EU NO. 596/2014) WHICH IS PART OF UK LAW BY VIRTUE OF THE EUROPEAN UNION (WITHDRAWAL) ACT 2018. UPON THE PUBLICATION OF THIS ANNOUNCEMENT, THIS INSIDE INFORMATION IS NOW CONSIDERED TO BE IN THE PUBLIC DOMAIN.

16 November 2023

BRAEMAR PLC

("Braemar", the "Company" and together with its subsidiaries the "Group")

Audited Final Results for the year ended 28 February 2023

Strong trading performance doubling profitability, achievement of key strategic objectives and a balance sheet built for growth  

Braemar Plc (LSE: BMS), a leading provider of expert investment, chartering and risk management advice, today announces its audited final results for the year ended 28 February 2023 ("FY23").

The board is delighted to report an outstanding year of revenue generation and profitability and, with the independent investigation now completed, looks to the future with confidence. The 2023 Annual Report and Accounts will be available on the Company's website (www.braemar.com).

RESULTS HIGHLIGHTS

Financial performance

* Underlying results measures above are before specific items, including acquisition and disposal-related charges and profit/loss from discontinued operations.

Financial highlights

· FY23 a year of outstanding revenue generation and underlying operating profitability.

· 51% increase in revenue from continuing operations, driven by strong performances in all segments to £152.9m (FY22: £101.3m).

· Increased revenue driving a 100% increase in underlying operating profit to £20.1m (FY22: £10.1m).

· Reported profit after tax for the year down 67% to £4.6m (FY22: £13.9m), after goodwill impairment in FY23 of £9.1m (FY22: £nil) and expensed acquisition costs of £2m (FY22: £nil).

· Significant strengthening of the balance sheet with net cash up to £6.9m as at 28 February 2023 (FY22: net debt of £9.3m), enhancing the Group's ability to execute a growth-oriented strategy.

· Underlying earnings per share increased by 65% to 46.22 pence (FY22: 27.95 pence).

· Recommended final dividend for FY23 of 8.0 pence per share, reflecting the Group's strong trading performance and confidence in the prospects of the business, representing total dividends for the year of 12.0 pence per share (FY22: 9.0 pence).

Operational highlights

· Simplified strategy, focusing on core expertise of shipbroking, delivering tangible results.

· Acquisition of Southport Maritime Inc. in the USA and Madrid tanker desk in Spain, as well as launch of Natural Gas and Oil derivatives desks significantly enhancing the diversification and resilience of the Group.

· Transaction volumes expanded strongly, with fixture numbers up 32% from prior year.

· Average revenue per head for FY23 was £398,000, a 42% increase on the prior year.

Current trading and outlook

· With the independent internal investigation completed, the board continues to pursue its stated growth strategy, to capitalise on the Group's strong platform and act as a consolidator in the fragmented shipbroking market.

· The Group expects to build on FY23's exceptional performance and continues to trade well in FY24, remaining on track to deliver underlying operating profit of not less than £18m from FY25 onwards.

· Sentiment in the short and medium-term, as measured by time charter rates, is broadly positive, and the vessel supply and freight demand pictures in the Group's two biggest markets, Tankers and Dry Cargo, look promising for the foreseeable future.

· The Group's forward order book continues to strengthen, standing at $65.6m as at 31 October 2023, 17% higher than $56.2m as at 28 February 2023.

· With the Group's growth-focused strategy delivering strong results, the board looks to the future with confidence.

James Gundy, Group Chief Executive Officer, commenting on the Group's FY23 results, said:

"I am proud to announce this outstanding performance from Braemar. We achieved what we promised in our key performance metrics, as well as investing to enhance the long-term resilience of the Group. Our strategy of focusing on our core expertise, shipbroking, is undoubtedly at the centre of our success. We have simplified the business, returned it to growth, and transformed the balance sheet. Braemar is now firmly on a long-term growth trajectory.

"The delivery schedule of ships in almost all sectors remains manageable; many inefficiencies in global supply chains remain post-Covid-19; large parts of the tanker and dry cargo fleets are travelling much longer distances due to sanctions; and vessel scrapping is likely to pick up ahead of a stricter regulatory environment and an increased focus on ESG-criteria for investments. All of which are positive factors for the Group.

"We are confident in our ability to continue to seize the opportunities available to us and maintain strong levels of activity, as a result of our strategic investments in our people, offices, and technology. We look forward to another good year of trading, as the benefits of our clear focus, our growth strategy, prudent cost control and operational gearing compound for the benefit of all stakeholders".

Results Roadshow and Online Presentations

Given the proximity of this announcement to the H1 FY24 results, which are scheduled to be released on 29 November 2023, the Company is hosting a combined results roadshow, which will commence with an analyst briefing on Wednesday, 29 November 2023 at 10.30am at Buchanan's offices at 107 Cheapside, London, EC2V 6DN. Please contact the team at Buchanan via braemar@buchanan.uk.com for further details.

The Company is also hosting an online investor presentation with Q&A on Friday, 1 December 2023, commencing at 1pm. To participate, please register with PI World at https://bit.ly/BMS_FY23_webinar.

For further information, contact:

CHAIRMAN'S STATEMENT

I am delighted to report an outstanding year of revenue generation and underlying operating profitability for Braemar. The Group achieved substantial revenue growth, significantly expanded transaction volumes, and generated impressive earnings, whilst building a strong balance sheet and ample financial liquidity. With a streamlined and simplified business model now in place, the Group is making excellent progress towards its strategic, operational, and Environmental, People, Social & Governance ("EPSG") goals.

The markets in which the Group operates were generally favourable during this financial year. While the Group is cautiously optimistic about market conditions in its key sectors in the years ahead and has taken numerous steps to make the business more resilient, as shipping is an inherently volatile and cyclical business. Factors such as a weaker global economy, increased environmental regulation, or commodity export bans could dampen demand for seaborne trade, whereas geopolitical tensions and conflict can increase market prices leading to higher revenue.

I was appointed in May 2021 with a mandate to help Braemar's new management team in two areas: to streamline and simplify the Group's operations and to develop and execute an ambitious, shipbroking-focused, growth strategy.

I am pleased to report that we have made strong progress on both objectives. The simplification of the Group is now complete: we have disposed of all non-core businesses and assets, and have transformed the Group's balance sheet from net debt of £9.3m on 28 February 2022 to a net cash position of £6.9m as at 28 February 2023.

Staff numbers and transaction volumes increased in line with our expectations, augmented by several bolt-on acquisitions, and the development and execution of our growth strategy is also progressing well. During this past financial year, the Group acquired a leading US shipbroker in Southport Maritime Inc. in Florida, USA; a 10-strong tanker desk in Madrid, Spain and a Natural Gas desk; and an Oil Derivatives desk in London. I am pleased to report that the Group's clients have responded positively to the services we have added to our operations and all of the additional services are performing well.

Our targeted hiring strategy also proved successful in the year. The total number of people working at Braemar increased by 6% to 384 (28 February 2022: 362), with an increase in fixtures of 18%. It is important to note that this growth in fixtures was proportionately much greater than the increase in the Group's broker headcount, and demonstrates the Group's ability to achieve non-linear growth, with average revenue per head increasing by 42% to £398,000.

Strong trading performance

It is well reported that the period corresponding to FY23 was one of strong trading in the global shipping and energy industries. Trading in both sectors is predominantly in US dollars, but the Group's major costs are in sterling. This meant that the Group reaped the rewards of a well-structured FX hedging strategy as well as benefiting from favourable foreign exchange rates.

Revenue from continuing operations rose by 51% to £152.9m (2022: £101.3m), generating a 100% increase in underlying operating profit from continuing operations of £20.1m (2022: £10.1m). Primarily as a result of specific items, including £9.1m of goodwill impairment, reported profit after tax decreased by 67% to £4.6m (2022: £13.9m). Underlying earnings per share increased by 65% to 46.22 pence (2022: 27.95 pence), and the Group's reported earnings per share decreased by 65% to 15.85 pence (2022: 45.56 pence).

Progressive dividend policy 

In my statement last year, I was pleased to announce the introduction of a progressive dividend policy to supplement the Group's growth strategy. The introduction of this policy demonstrated the board's confidence in the growing financial strength and prospects of the Group, its belief in the importance of dividends for shareholders, and its intention to include the payment of progressive dividends in the Group's growth agenda.

As a result of the exceptional cash-generation by the Group's activities in the year, I am pleased to announce that the board is recommending a final dividend for FY23 of 8.0 pence per share for approval by shareholders at the Group's reconvened AGM on 18 December 2023, to be paid on 9 February 2024. This final dividend together with the interim dividend already paid of 4.0 pence per share, represents a total dividend for the year of 12.0 pence, an increase of 33% over last year (2022: 9.0 pence per share).

I am also pleased to report that the Capital Reduction process was completed as planned on 5 June 2023, addressing the historic payment of unlawful dividends and increasing the Group's capacity to pay future dividends.

The final dividend will be paid on 9 February 2024 to shareholders who are on the register at the close of business on 5 January 2024, with a corresponding ex-dividend date of 4 January 2024. The last date for Dividend Reinvestment Plan ("DRIP") elections will be 19 January 2024.

Enabling climate-smart shipping

I am proud to be the Chairman of a business which believes that taking care of the environment, treating colleagues and clients fairly, and maintaining ethical business practices is not only the right thing to do, but is also good for business. 

Our corporate operations have been globally carbon neutral for six years. This has, to date, been achieved by investing in offset programmes. I am pleased to report that the Group made continued progress in the year by further reducing its carbon footprint and adopting more environmentally friendly practices across its operations. In April 2023, the Group's ESG efforts and future commitments were recognised by the Financial Times and Statista, who named Braemar one of 'Europe's Climate Leaders'. This title reflects the progress Braemar has already achieved to reduce its Scope 1 and 2 emissions. There is more to be done to enhance the Group's measurement and reduction of Scope 3 emissions, and I look forward to reporting on progress in this area in the coming years.

Braemar is incorporating climate-smart expertise throughout its client service offering, and, as a business, we are committed to exploring new ways to enable our clients to achieve their sustainability ambitions. Over the last year, we have developed our sustainability offering further. As well as being able to service the voluntary carbon market via Braemar Offset, the Group is now providing clients with the access to the mandatory carbon credits they need to fulfil their obligations under the EU's Emissions Trading System (ETS).

The Braemar board

The Braemar board is functioning well. We have a well-balanced team of executives and non-executives, with wide ranging experience, skills and expertise from diverse sectors, who are united in their approach to the business.

On 31 January 2023, Stephen Kunzer, non-executive Director, stood down from the board to take up the position of Chief Executive Officer of Lila Global. Stephen played a supportive role in developing the Group's new growth strategy and we wish him well in his new executive role in the industry.

Cat Valentine joined the board, as an independent non-executive Director, with effect from 16 May 2023. She is a member of both the Remuneration Committee and Audit & Risk Committee. Cat is a communications professional with extensive knowledge of the small-cap growth companies' market and considerable M&A transaction experience. As the Group continues to develop and implement its expansion and growth agenda, her expertise will add considerable value to the board and will help the Group to further deliver on its strategic ambitions.

Grant Foley joined the board as Group Chief Financial Officer on 1 August 2023. Grant has more than 25 years' experience in leading public and private financial services and technology businesses, and joined the Company from ClearScore, the UK's leading credit marketplace, where he served as Chief Financial Officer. At ClearScore, Grant drove significant improvements across the finance function, implementing new systems, processes and reporting as the business scaled. Grant also brings additional transaction experience to the board, and his other roles have included CMC Markets Plc where, as Group Chief Financial Officer and Chief Operating Officer, he was instrumental in the company's successful IPO. The board thanks Nick Stone, who stepped down as Group Chief Financial Officer on 31 July 2023, for his contributions during his four years at Braemar.

Internal independent investigation

As announced on 26 June 2023, the board commenced an internal independent investigation into an historical transaction dating back to 2013. As a result, the publication of these financial results was delayed, and the Group was not able to publish its FY23 results by 30 June 2023 as required under the Financial Conduct Authority's Disclosure Guidance and Transparency Rules. Consequently, the Company requested that trading in its ordinary shares be suspended, this request was granted and suspension in the trading of the Company's ordinary shares took effect on 3 July 2023. The investigation was overseen by an Investigation Committee, chaired by myself and solely comprising the independent non-executive Directors. The investigation was conducted by FRP Advisory Trading Limited, an independent specialist forensic accounting firm, and independent external counsel. The investigation was complex, it was comprehensive and ultimately focused on a review of several transactions between 2006 and 2013.

The investigation has now been completed. The board and the Group have acted promptly to address the process and control areas that were identified as requiring improvement, including taking key remedial actions and the necessary steps to comply with the Group's legal and regulatory obligations. The board is committed to maintaining a high standard of corporate governance and will ensure the remedial actions are tracked through to completion. The Group has recognised a provision in relation to these transactions, which is primarily historical unsettled commissions payable and is treated as a balance sheet reclassification as detailed in the Financial Review, which the board considers appropriate at this time.

Our most valuable assets

On behalf of the board, I would like to thank every one of the Group's employees for their hard work and dedication; our clients for their trust and support; and our shareholders for their continued confidence in our Company.

Over the past year, the Group continued to invest in its people. We expanded our teams across the globe, implemented new programmes to attract and retain top talent, and our strong performance is due to their hard work and creativity. As a result of their successes, the Braemar brand continues to rise. This is now beginning to create a virtuous circle, in which, as our reputation grows, we are better able to attract high performers, who further enhance Braemar's performance, working environment, brand and overall client offering to the benefit of all stakeholders.

There is a renewed energy within Braemar, and the business is in a good place, led by our excellent Group CEO, James Gundy, and his experienced executive management team. The energy, drive and focus within the business is there to be seen.

Outlook

The market conditions in the Group's core sectors, shipping and energy, generally remain healthy, and the long-term outlook for the Group remains favourable.

Trading in FY24 to date has been good (and in line with the board's expectations), as the benefits of Braemar's increased breadth, depth, and scale continue to compound. As expected, the investments made in the last year have increased the cost base for the new financial year, but also provide a platform for further growth in future years. The Group remains on-track to double FY21's operating profit by FY25, delivering strong returns and creating long-term value for our stakeholders.

With this growth-focused strategy delivering strong results, the board looks to the future with confidence.

Nigel Payne

Chairman

15 November 2023

GROUP CHIEF EXECUTIVE OFFICER'S STATEMENT

I am delighted to present our Annual Report for FY23. This is my second year as Group CEO, and I am extremely proud to announce such a strong set of results. My key focus upon becoming CEO was to return to our core expertise, shipbroking, as this has always been at the centre of our success. We have simplified the business and returned it to growth, which in turn has placed Braemar firmly back on a growth trajectory. We have achieved this by capitalising on strong markets, selling non-core businesses, reducing our debts and subsequently investing in the long-term resilience of the Group.

The successful implementation of this strategy has achieved excellent results for the Group in FY23. Underlying operating profit rose by 100% to £20.1m (FY22: £10.1m), and revenue increased by 51% from £101.3m to £152.9m, as revenue and fixture volumes increased on almost every Shipbroking desk. It is worth emphasising that the growth the Group has achieved in terms of revenue and profit are from a business that has a much lower headcount (compared with the headcount prior to the Cory Brothers sale in March 2022) and has been hugely simplified since I became CEO in 2021. Average revenue per head for FY23 was £398,000, an increase of 42% on the prior year.

We have a deeply experienced leadership team that knows this industry inside and out, and a strong balance sheet that is built for growth. Together they are enabling us to be a platform for consolidation in the fragmented shipbroking market, and we expect to continue diversification within shipbroking, in addition to growing organically and through M&A.

As part of the execution of our shipbroking-focused growth strategy we achieved significant milestones in FY23 including the acquisitions of Southport Maritime in the US, and a new tanker desk in Madrid. We also continued to enhance our Securities offering with the launch of new Oil derivatives and Natural Gas derivatives desks, which strongly complement our existing Tanker and Dry Cargo FFA desks. Our clients are responding favourably to our enhanced and diversified offering and the synergies which they provide.

Internal independent investigation

As detailed in the Chairman's Statement, the internal independent investigation commenced in late June 2023 has now been completed. It was time consuming and complex and I would like to thank the independent Investigation Committee for overseeing the process. I would also like to thank our clients and shareholders for their patience and understanding during this period. Braemar and its people have shown considerable resilience throughout this period, and I want to thank all our employees for their hard work and focus.

Braemar's growth and achievements this year would not have been possible without the relentless hard work and dedication of our global team, whose commitment to excellence continues to drive our performance and inspires me every day.

Building on strong foundations

Throughout a year of many challenges for the global economy, we remained firmly focused on delivering value to all our stakeholders. Our commitment to innovation and operational excellence has enabled us to remain agile and responsive in the constantly evolving shipping and energy landscapes.

As I outlined last year, our main ambition over the medium-term is to achieve a sustainable annual underlying operating profit, that regardless of market factors, is double the £8.9m underlying operating profit in FY21.

In FY23, we achieved 51% revenue growth and increased our underlying operating margin from 10% to 13% over FY22. In the year under review, we delivered further gains in revenue and profitability. Net bank cash at 28 February 2023 was £6.9m, helped by the initial proceeds of the sale of Cory Brothers (£6.5m) in March 2022 but after cash outflows for acquisitions totalling £7.3m (Southport for £6.3m, and a new tanker desk in Madrid for £1.3m upfront) - a substantial improvement on the net bank debt of £9.3m at 28 February 2022. Profit after tax was £4.6m (FY22: £13.9m), largely lower due to the impairment of goodwill relating to the Corporate Finance business.

Over this financial year, trading has been good across our Chartering and Sale & Purchase desks, as well as on our Investment and Risk Advisory desks. Chartering fixture volumes were up 18% across all desks, Risk Advisory revenues increased 42%, and Sale & Purchase transactions volume grew 23%.

Buoyant shipping and energy markets

In our industry, earnings are determined by the relationship between the supply of ships and the demand for ships. At its simplest, shipping is Economics 101. While there are variations from sector to sector, the key positive supply factors were shared across the industry: longer voyage distances, minimal fleet growth, and supply-chain inefficiencies. All these factors will remain in FY24 although they are likely to moderate and the demand picture in most sectors supports a positive rate floor.

Oil demand growth is back to where it was pre-Covid, and the IEA predicted in May 2023 that global oil demand in 2023 would be two million barrels per day higher than in 2022. Despite oil companies wanting newer ships to reduce the risks of accidents, the average age of the global fleet is becoming much older than it has been historically. Low scrapping and an unusually low orderbook is expected to further shrink the availability of modern ships over the next few years. This puts a high floor under tanker rates during a period when energy security concerns have increased voyage distances and tanker demand growth has accelerated relative to oil export volume.

The average age of the bulk carrier fleet is also increasing, while the orderbook for new ships is very small by historical standards - and it is a similar story in sectors such as Offshore. With demand for green energy and dry cargo commodities growing globally, combined with increased consumer demand now that China's Zero Covid policy has been revoked, we can expect to see positive returns over the medium term.

It is worth noting that not all markets are strong at the same time, and events impact shipping sectors in different ways. For example, in broad terms, Covid was good for dry cargo, and bad for tankers. This is why we are prioritising diversification in our shipbroking operations: and this is a key strength of the Group. Resilience through diversification is what will enable Braemar to be successful throughout the business and shipping cycles.

Investing in our EPSG

As I said in my report last year and have emphasised since, we remain committed to delivering sustainable growth and value to our shareholders and contributing to the communities and environments in which we operate. We are proud of the positive impact that our business has, and it will always be a Group priority to operate ethically.

Our sustainability strategy focuses on minimising our environmental impact, encouraging diversity and inclusion, and supporting local initiatives that drive positive change. We believe that shipping has a critical role to play in shaping a more sustainable world, and we are committed to doing our part.

Outlook: A stronger, more resilient business

Our resilience and adaptability have been tested over the last year, but our commitment to our strategic vision and values enabled us to emerge stronger than ever. A year on since my first CEO statement, I am delighted to be able to say that we have achieved the results we promised across every metric, and now we are a much more diversified and resilient shipbroking business.

We have invested in our people, expanded our product portfolio, and entered new markets and locations to diversify our revenue streams and mitigate risk. The investments that we have made, as we implemented our growth strategy, have enabled us to stay ahead of the curve in a rapidly changing industry, and will provide the foundations for an even stronger business in the years to come.

It is an exciting time to be at Braemar. Shipping is undergoing huge changes: in fuels, in trade patterns, and in the global regulations that govern how we operate. Thanks to these types of developments, the markets in which we operate are facing major volatility, and to achieve success in them requires the highest levels of expertise and practical experience. The investments that we have made since I became CEO have all been in the service of ensuring that we are able to continue to be able to deliver best-in-class advice, and to maximise the value we create for our clients. 

The Group has traded well in FY24 to date and we are on track to achieve the sustainable doubling of FY21's underlying operating profit by FY25. Given our investments, costs will be higher in FY24 and we have incurred non-recurring costs of c£2.5m in relation to the investigation. However, we have built strong foundations in my first two years as CEO and there is much more work to be done to achieve the Group's full potential. I look forward with confidence to the remainder of the year, as we relentlessly continue to execute our clear, growth-focused strategy.

I would like to express my gratitude to our shareholders, employees, clients, and partners for their continued support. Our successes would not have been possible without the hard work and dedication of our talented teams, or the trust and loyalty of our clients and partners. I look forward to another successful year ahead and remain committed to delivering exceptional results for all our stakeholders.

James Gundy

Group Chief Executive Officer

15 November 2023

FINANCIAL REVIEW

A strong trading performance and the successful execution of our strategic objectives

"Another excellent trading year, together with the first steps on the growth plan."

Grant Foley, Group Chief Financial Officer

Summary Income Statement FY23

The strong trading and higher revenues have delivered significant increases across all continuing profit measures.

? Statutory operating profit increased by 22% to £11.7m (FY22: £9.5m).

? Underlying operating profit increased by 100% to £20.1m (FY22: £10.1m).

? Statutory profit before tax increased by 11% to £9.5m (FY22: £8.5m).

?  Underlying profit before tax increased by 103% to £18.0m (FY22: £8.9m).

Statutory profit in FY23 was impacted by the impairment of the goodwill on acquisition of Naves (now Braemar Corporate Finance), which was completed by the previous management team in 2017.

Continuing operations

Revenue

Revenue from continuing operations grew by 51% from £101.3m to £152.9m, as revenue and fixture volumes across almost every Shipbroking desk increased, with the exception of Corporate Finance.

The US dollar exchange rate moved from US$1.34/£1 at the start of the year to US$1.21/£1 at 28 February 2023 with an average of US$1.21. A significant proportion of the Group's revenue is earned in US dollars. Revenue growth was positively impacted by the strong US dollar, which contributed around 24% of the overall increase. US dollar revenue increased by 48% in the period.

To protect the future sterling value of those revenues, at 28 February 2023, the Group held forward currency contracts to sell US$123m at an average rate of US$1.22/£1.

Operating costs

Due to the substantial increase in revenue and the considerable hard work, which was put into its generation, there was a corresponding increase in profit-related bonuses paid to the brokers. This was the main contributor to the increase in operating costs, compared to the prior year. As planned, salary costs also increased, due to the investment in new brokers and desks, the new office in Madrid and the acquisition of Southport in the US. Travelling and entertaining expenditure increased to £6.4m from £2.1m, as a result of a full year largely free from Covid restrictions. As a result of all these factors, underlying operating costs increased by 46% from £90.5m to £132.6m.

Central costs

Central costs increased in total by 49% from £4.2m to £6.2m. This was the result of increased share-based payment charges, linked in part to the improved performance in the year and higher levels of expected vesting of awards, higher staff costs and non-recurring costs related to the delayed year-end audit process.

Net finance costs

Net finance costs for the year increased by 123% to £2.2m (2022: £1.0m). The cost has three elements: the revolving credit facility provided by HSBC, which provides the working capital needed by the business as well as the core indebtedness; the convertible loan notes associated with the acquisition of Braemar Naves; and the interest charge on the liability associated with right-of-use assets accounted for under IFRS 16. Average net debt improved versus FY22 and average borrowing is largely in line with FY22, but costs have increased in the year as a result of the increases in interest rates with average SONIA increasing from 0.1% in FY22 to 1.9% in FY23. In addition, there has been an adverse movement in foreign exchange rates, causing an increase of £0.5m to finance costs largely in relation to the euro denominated Naves liabilities.

Included within the net finance costs in FY22 is a credit of £0.2m, which did not recur in FY23. This was in respect of the accounting for the restructuring of deferred consideration owed in relation to the acquisition of Braemar Naves.

Finance income includes a credit of £0.1m, relating to the revaluation of amounts due for the sale of Cory Brothers that took place in the previous year.

Specific items and discontinued operations

Discontinued operations

In FY22, the board successfully executed several transactions with the aim of simplifying the Group's operations to concentrate on a new growth strategy centred around Shipbroking. As a result, the financial results of Wavespec, AqualisBraemar and Cory Brothers, which were disposed of during the year, have been presented as discontinued operations, together with the profits and losses on their disposal. In aggregate, all these items total a profit of £7.2m.

Specific items

Alternative profit measures ("APMs")

Braemar uses APMs as key financial indicators to assess the performance of the Group. Management considers that the APMs used by the Group help to provide an alternate assessment of business performance, by excluding items which management does not believe relate to business performance in the period, and provide useful information to investors and other interested parties. We have separated the impact of individually material capital transactions, such as acquisitions and disposals, from ongoing trading activity to allow a focus on ongoing operational performance. Our APMs include underlying operating profit and underlying earnings per share.

Items that are not considered to be part of the ongoing trade of the Group have been presented as specific. These items are material in both size and/or nature and we believe may distort understanding of the underlying performance of the business if not identified separately. Details of these items can be found in Note 10 to these Financial Statements.

The most significant of these items is an impairment of goodwill. As a result of a weaker performance in FY23, a more negative outlook for the business and challenging market conditions, the Group has recognised an impairment of £9.1m to the Goodwill which arose on the acquisition of Naves. Further details can be found in Note 15.

As a result of accounting requirements, a gain on bargain purchase on the acquisition of Southport of £3.6m was recognised in the Group's Income Statement. This gain arises due to the recognition of acquired net assets, while for accounting purposes the consideration is treated as a post-acquisition employee expense.

Balance Sheet

Net assets at 28 February 2023 were £76.7m (FY22 restated: £71.5m). The year saw an increase in gross trade receivables of 28% to £32.0m from £25.0m, due to the 51% revenue growth in shipbroking during the period. Despite this rise in gross trade receivables, the provision for impairment of trade receivables only increased by 18%, reflecting strong working capital management and control over receivables ageing. A receivable of £5.0m (FY22: £4.8m) is included in other long-term receivables in respect of the VertomCory deferred and contingent consideration.

Capital expenditure

Total capital expenditure was £1.7m (FY22: £2.3m). The most significant item of capital expenditure relates to the treatment of office leases under IFRS 16 whereby the lease is treated as an asset addition. These lease additions were £0.9m in the year (FY22: £1.0m) and do not relate to cash payments in the year. The balance relates to capitalised expenditure on computer equipment/software of £0.5m (FY22: £0.8m) and other expenditure on fixtures and fittings of £0.3m (FY22: £0.3m).

Provisions (internal independent investigation)

In June 2023, the board commissioned an internal independent investigation into an historical transaction originating in 2013. The investigation was overseen by an Investigation Committee chaired by the Group's non-executive Chairman and was conducted by an independent specialist forensic accounting firm and independent external counsel. The investigation was comprehensive and complex and ultimately encompassed several transactions between 2006 and 2013, which required further investigation.

As a result of the investigation, the Group has recognised a provision of £2.0m in relation to the uncertain obligations connected to a number of the transactions and commission obligations identified as part of the investigation. Of the £2.0m, £1.7m relates to historical unsettled commission payable, which was recorded in 2017 upon completion of the relevant contracts, which originated in 2013. This balance has been reclassified from trade payables to provisions during the year. While the board cannot forecast with certainty final outcomes in respect of these obligations, based on the Group's current information, the amount recognised is the current best estimate of the amount required to settle the obligations at the balance sheet date, taking into account the risks and uncertainties surrounding the obligations, including interpretation of specific laws and likelihood of settlement. Non-recurring costs of c£2.5m will be reported in FY24 regarding the investigation.

As the ultimate potential obligations and outcomes in relation to the transactions subject to the internal independent investigation are uncertain, there remains a risk that the final outcomes could materially impact the recognised balance. It is impracticable to provide sensitivity estimates of potential downside variances at this time.

Borrowings and cash

At the Balance Sheet date, the Group had a revolving credit facility with HSBC of £30.0m. The facility also provides access to a global cash pooling facility in the UK, Germany and Singapore, which enables efficient management of liquidity between its main regional hubs. The Group operates a pooling arrangement for cash management purposes and at the end of the year the Group had net cash of £6.9m (2022: net debt £9.3m).

Retirement benefits

The Group has a defined benefit pension scheme, which was closed to new members during FY16. The scheme has a surplus of £1.1m (FY22: deficit £2.1m), which is recorded on the Balance Sheet as at 28 February 2023. The agreed annual scheme-specific funding, since the triennial valuation as at March 2020, was a cash contribution of £0.5m per annum. As a result of the net asset position, these contributions were stopped from March 2023.

Taxation

The Group's underlying effective tax rate in relation to continuing operations in FY23 was a charge of 26% (FY22: 21%), which is broadly in line with the UK tax rate in the current year. The increase was largely driven by a benefit in the prior year relating to a change in applicable tax rate to an overseas entity, and additional non-deductible costs in the current year.

Capital management

The Group manages its capital structure and adjusts it in response to changes in economic conditions and its capital needs. To maintain or adjust the capital structure, the Group may adjust the dividend payment to shareholders, return capital to shareholders or issue new shares and debt instruments. The Group has a policy of maintaining positive cash balances, whenever possible, which can be supported by short-term use of its revolving credit facility. This is drawn down as required, to provide cover against the peaks and troughs in our working capital requirements.

ESOP Trust

During FY23, the Company requested that SG Kleinwort Hambros Trust Company (CI) Ltd, as Trustee of the Company's ESOP Trust, purchase shares in Braemar Shipping Services Plc. During the year a total of 2,795,000 shares in the Company were purchased by the Trustee and 1,877,473 shares were released; as a result, at 28 February 2023, the ESOP held 3,579,630 shares (FY22: 2,669,603 shares). The total cash outflow as a result of these share purchases was £8.0m (FY22: £7.0m). At FY23 year end, the ESOP contained sufficient shares as are expected to be needed to cover all current share awards described in Note 31 of the Financial Statements.

Dividend

The directors are recommending for approval at the reconvened AGM on 18 December 2023, a final dividend of 8.0 pence per share, to be paid on 9 February 2024. The interim dividend of 4.0 pence per share in respect of the six months to 31 August 2022 was paid 4 January 2023. The total dividend of 12.0 pence for the year is covered 3.6 times by the underlying earnings per share from continuing operations of 43.19 pence. The total cash outflow in respect of dividends paid during the year ended 28 February 2023 was £3.2m (2022: £2.1m).

Following a project started during the year to improve the level of distributable profits of the Company, it was discovered that certain dividends paid between 2016 and 2023 were paid by the Company without having sufficient distributable reserves from which to lawfully pay them. Having identified these issues, to rectify the gap in retained earnings and the unlawful payment of dividends, after the balance sheet date the Company completed a Capital Reduction and entered releases from liability for the benefit of shareholders and directors. For further details see Note 12.

Going concern

The strong trading cash flows generated during the year, combined with the cash consideration received for the sale of Cory Brothers on 2 March 2022 have placed the Group in a strong cash position, with a net cash position at the year end. The Group will maintain its prudent approach to working capital forecasting and credit controls. The Group's revolving credit facility was renewed in November 2022 on largely similar terms to the previous one it replaced and provides the seasonal working capital that is required. Accordingly, the accounts have been prepared on a going concern basis.

Grant Foley

Group Chief Financial Officer

15 November 2023

Operating Review

Market Review

During FY23, shipping markets performed well. Earnings across the Container, Gas, and Tanker markets were some of the highest recorded in the last 20 years, and Dry Cargo revenues were close behind.

As we look ahead, we are cautiously optimistic. Sentiment in the short and medium term, as measured by time charter rates, is broadly positive, and the vessel supply and freight demand pictures for the shipping markets look promising in our two biggest markets - Tankers and Dry Cargo - over the foreseeable future.

The delivery schedule of ships in almost all sectors remains manageable; many inefficiencies in global supply chains remain post-Covid; large parts of the tanker and dry cargo fleets are travelling much longer voyage distances due to sanctions; and vessel scrapping is likely to pick up ahead of a stricter regulatory environment and an increased focus on ESG-criteria for investments.

We now present a FY23 summary of our three business segments: Investment Advisory, Chartering, and Risk Advisory

INVESTMENT ADVISORY

Investment Advisory's revenue increased by 40% from £26.3m in FY22 to £36.8m in FY23 and represented 24% of Braemar's total revenue.

Corporate Finance

Strong earnings in 2022 and the start of 2023 across most sectors have meant that many shipowners have achieved significant profits and accumulated large cash reserves. Many owners decided to use their profits to opt for more conservative financing structures. As a result, the diversity of Corporate Finance's mandates has varied considerably. These diverse projects have included the disposal process for the Cruise Ship Global Class One out of the insolvency of the German yard MV Werften, restructuring in the Offshore space, disposals in the Container market, and inland waterway M&A advisory. Despite these successes, revenue and profits were down compared to the previous year. Corporate Finance successfully launched a new office in Athens, Greece, and expanded its Singapore office.

Sale & Purchase / Newbuildings

Sale and Purchase activity has remained strong with a record number of second-hand sales across all sectors and desks. The strong spot tanker market has contributed hugely to a significant rise in tanker asset prices, and the tail-end of the strongest container market in decades has created many high asset value transactions. The desk has continued to grow its forward orderbook in many sectors, including LNG, Bulkers and Tankers. Newbuilding berths have been at a premium, and the desk's strong relationships with leading shipyards have reaped benefits for its clients. However, with strong freight markets across the board, ship recycling volumes have remained light. The desk is optimistic about the outlook for the wet and dry freight markets in FY24 and expects this to continue to translate into a good volume of transactions.

CHARTERING

Chartering's revenue increased by 57% from £63.0m in FY22 to £99.2m in FY23 and represented 65% of Braemar's total revenue. Fixture volumes increased by 18% compared with the previous year.

Tankers

Vessel earnings increased across all classes of Deep Sea Tankers. The increase in long-haul voyages because of changes to crude trade flows was the major driver for Aframaxes and Suezmaxes, and VLCC earnings were driven by increased activity in the US Gulf. However, VLCC demand was limited by the economic restrictions in China which were removed only recently. The acquisitions of Southport and the new desk in Madrid have already created several productive cross-office collaborations, and further enhanced and complemented the quality of Braemar's global coverage, particularly for the Spanish clean markets and US Gulf's crudes and oil products.

Supply chain challenges prompted by the pandemic and a resurgence of interest in nearshoring and reinvigorating American manufacturing put the Jones Act in the spotlight this year. Demand is likely to remain strong, and further use of its waterways to transport freight looks increasingly likely. The US Flag desk has seen strong rates in FY23 which look likely to continue, and recently launched an Inland desk to capitalise on opportunities in that market. The desk worked with three oil majors for the first time last year, and the desk is currently on track for 30% revenue growth.

Dry Cargo

Coal was the major theme of the year as natural gas prices soared and countries sought less expensive energy sources. The orderbook remains historically low, and new environmental regulation arriving in 2023-24 - with more on the horizon - is likely to set the tone for a favourable vessel supply/demand balance in the coming years. Dry Cargo has continued to strengthen its presence in strategic bases such as Athens, Greece, and Sao Paulo, Brazil. The desk has already seen positive results from its ability to leverage those enhanced local relationships. In Australia, major gains have been seen in the grains market, and solid Contract of Affreightment ("COA") cover - an agreement to transport a given quantity over a fixed period - for 2023 has strengthened relationships with key charterers. The Dry Cargo desk has also been instrumental in helping the United Kingdom's Ministry of Defence department fulfil its multipurpose vessel ("MPP") requirements, and it worked closely with the UN's World Food Programme to help ship fertiliser to Malawi to help it reduce the costs of crop production.

Offshore Energy Services

The Renewables and Oil & Gas markets delivered growth throughout the year. Vessel supply was insufficient to meet demand, and charter rates increased substantially. A lack of newbuilding orders in recent years increases the likelihood that these rate levels are going to remain elevated for a prolonged period. This shortage of vessels has led to substantially increased S&P activity for the desk, particularly in the Platform Supply Vessels ("PSV") and Subsea sectors. The desk's forward order book growth to March 2023 was double that of March 2022, and the outlook for the year ahead is positive with the volume of term fixtures increasing, and spot and term rates likely to continue to improve.

Specialised Tankers

*LNG and LPG & Petrochemicals are subsets of Specialised Tankers

FY23 saw the strongest chemical and European coastal products tanker market for many years. This was primarily caused by reduced ship supply - increasing ton-miles, swing tonnage exiting chemicals, and a reduced order book -, and these tailwinds are unlikely to completely disappear in FY24. The desk continued to grow, and it is capitalising on its investment in research, and geographical expansion to Dubai, Houston, and Melbourne which strongly complement the main desk in London. This growth has enabled Specialised Tankers to expand its reach and market share, and to realise further intra-desk synergies.

LNG

The elimination of Russian pipeline gas supply to Europe, in large part because of the war in Ukraine had profound effects on the LNG market. Long established trade routes switched from West to East as US gas volumes were directed to Europe to replace Russian volumes. Gas prices soared and with it demand for medium and long-term LNG shipping, with rates for certain vessels peaking at approximately USD 500k per day. In line with Braemar's growth strategy, the LNG desk has grown to six people, split between London and Geneva. Revenue continues to be well diversified across the desk's activities, and there is further growth planned into FY24.

LPG & Petrochemicals

Prospects for the freight market look positive as Very Large Gas Carrier ("VLGC") shipowners expect increased vessel demand, despite the current forward order book of approximately 20% of the existing fleet. Similarly, in the Medium Gas Carrier ("MGC") market the outlook remains good; mostly due to the projected expansion in liquid ammonia shipments in the near future. From a shipping perspective the Petrochemical segment had a reasonably strong year, and the Pressurised segment had a solid year with improved results from both spot and time charter coverage. Braemar's LPG & Petrochemicals desk has enhanced its MGC and VLGC presence with the recruitment of an ex-bunker broker, and concluded two new long-term petrochemical COAs as well as renewing another. The desk has realised increased time charter coverage and grown its customer base this year, with several promising long-term projects on the horizon for FY24.

RISK ADVISORY (SECURITIES)

Risk Advisory's revenue increased by 42% from £12.0 in FY22 to £17.0m in FY23 and represented 11% of Braemar's total revenue.

Braemar's Securities business consists of four derivatives markets: Dry Cargo, Natural Gas, Oil, and Tanker.

Dry Cargo Derivatives

The FFA market reflected the volatility of the Dry Cargo market over the last 12 months, but the outlook for the next year and beyond is looking likely to be fertile. Volumes across the market have grown dramatically, and continue to increase, with more non-traditional financial capital increasingly finding its way into the FFA market. The Dry Cargo FFA desk has also started to reap the benefits of Braemar's investment in its Securities businesses, including through the launch of Dry Cargo FFA operations for Asia in Singapore, as well as hiring several brokers. The addition of the Natural Gas and Oil Derivatives desks has led to cross-desk synergies as the business is able to service customers across asset classes, and Braemar Screen continues to provide the market's leading technology platform.

Natural Gas Derivatives

The Natural Gas market is returning to price normality after the major shock it endured when Russia invaded Ukraine in 2022. Substantial pressure on Nat Gas availability led to record high spot prices, and gas import markets remain sensitive to further supply restrictions. Braemar's Natural Gas desk started operations in January 2023, and is already profitable. It has successfully launched a new product - Trade At Heren ("TAH") - that the market hasn't previously traded, and the desk is receiving significant interest in its ability to broker European Union Allowances ("EUA") for compliance with the EU's Emissions Trading System ("ETS").

Oil Derivatives

In the oil markets the last 12 months have been marked by high volatility and low trading volumes in swap markets. Although these trends have been softened by war in Ukraine and the post-Covid recovery of global demand. 2023 has brought renewed activity, and traded volumes are steadily increasing. The desk's initial focus on fuel oil and middle distillates is progressing steadily, and Braemar's new ability to help its clients hedge their bunker fuel exposure through swap and option markets has been warmly received.

Tanker Derivatives

The Tanker FFA market was extremely volatile throughout 2022, primarily because of the Russia-Ukraine conflict. That volatility led to a historical dealing high across the Dirty, Clean and LPG FFA sectors. This year has continued in a similar fashion with growing requirements to hedge and opportunities to speculate on prices. As a result, the Tanker FFA market is expected to continue to thrive in FY24. The acquisition of Southport has enabled the desk to create a stronghold on US Gulf FFA routes, and the desk remains the leading global facilitator of Clean, Dirty and LPG FFAs.

Consolidated Income Statement

For the year ended 28 February 2023

1 The 2022 operating costs have been restated to show impairment of financial assets separately on the income statement. Impairment of financial assets was previously within operating costs.

Consolidated Statement of Comprehensive Income

For the year ended 28 February 2023

Consolidated Balance Sheet

As at 28 February 2023

The Balance Sheets as at 1 March 2021 and 28 February 2022 have been restated for a prior period adjustment, see Note 35 for more detail.

Consolidated Cash Flow Statement

For the year ended 28 February 2023

1 The 2022 cash proceeds and repayment from the RCF facility have been restated as they were previously reported as £292,000 on a net basis.

Consolidated Statement of Changes in Total Equity

For the year ended 28 February 2023

Notes to the Financial Statements

General information

Braemar plc (the "Company", previously Braemar Shipping Services plc) is a public company limited by shares incorporated in the United Kingdom under the Companies Act. The Company is registered in England and Wales and its registered address is 1 Strand, Trafalgar Square, London, United Kingdom, WC2N 5HR. The consolidated Financial Statements of the Company as at and for the year ended 28 February 2023 comprise the Company and its subsidiaries (together referred to as the "Group")

The Group Financial Statements of Braemar Plc for the year ended 28 February 2023 were authorised for issue in accordance with a resolution of the directors on 15 November 2023.

1 Basis of preparation

Basis of preparation and forward-looking statements

The financial information set out above does not constitute the Group's statutory accounts for the years ended 28 February 2023 or 28 February 2022 but is derived from those accounts. Statutory accounts for 2022 have been delivered to the registrar of companies, and those for 2023 will be delivered in due course. The auditor has reported on those accounts; their reports were (i) unqualified; (ii) did not include a reference to any matters to which the auditor drew attention by way of emphasis without qualifying their report; and (iii) did not contain a statement under section 498 (2) or (3) of the Companies Act 2006.

The financial information included in this preliminary announcement has been prepared in accordance with UK-adopted international accounting standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. The Group expects to distribute full accounts that comply with UK-adopted international accounting standards and with the requirements of the Companies Act 2006.The Financial Statements have been prepared under the historic cost convention except for items measured at fair value as set out in the accounting policies below.

Certain statements in this report are forward-looking. Although the Group believes that the expectations reflected in these forward-looking statements are reasonable, it gives no assurance that these expectations will prove to have been correct. These forward-looking statements involve risks and uncertainties, so actual results may differ materially from those expressed or implied by these forward-looking statements.

The Group Financial Statements are presented in sterling and all values are rounded to the nearest thousand sterling (£'000) except where otherwise indicated.

New standards, amendments and interpretations effective for the financial year beginning 1 March 2022

There were no new standards or amendments (including the amendments to IFRS 3, IAS 1 and the Annual Improvements to IFRS Accounting Standards 2018-2020 Cycle) that were adopted in the annual Financial Statements for the year ended 28 February 2023 which had a significant effect on the Group.

New standards, amendments and interpretations issued but not yet effective for the financial year beginning 1 March 2022 and not early adopted

There are a number of standards, amendments to standards, and interpretations which have been issued by the IASB that are effective in future accounting periods that the Group has decided not to adopt early.

The following amendments are effective in future periods and have not been early adopted by the Group:

- Insurance Contracts (IFRS 17 Insurance Contracts and amendments to IFRS 17);

- Sale or Contribution of Assets between an Investor and its Associate or Joint Venture (Amendments to IFRS 10 and IAS 28);

- Classification of Liabilities as Current or Non-current (Amendments to IAS 1);

- Disclosure of Accounting Policies (Amendments to IAS 1 and IFRS Practice Statement 2);

- Definition of Accounting Estimates (Amendments to IAS 8);

- Deferred Tax Related to Assets and Liabilities arising from a Single Transaction (Amendments to IAS 12); and

- International Tax Reform - Pillar Two Model Rules - Amendments to IAS 12

The adoption of these standards and amendments is not expected to have a material impact on the Financial Statements of the Group in future periods.

In January 2020, the IASB issued amendments to IAS 1, which clarify the criteria used to determine whether liabilities are classified as current or non-current. These amendments clarify that current or non-current classification is based on whether an entity has a right at the end of the reporting period to defer settlement of the liability for at least 12 months after the reporting period. The amendments also clarify that "settlement" includes the transfer of cash, goods, services, or equity instruments unless the obligation to transfer equity instruments arises from a conversion feature classified as an equity instrument separately from the liability component of a compound financial instrument. Following concerns raised by stakeholders, the IASB issued further amendments in October 2022 to specify that only those covenants which an entity must comply with on or before the reporting period should affect classification of the corresponding liability as current or non-current. The October 2022 amendments defer the effective date of the January 2020 amendments by one year in order that both sets of amendments are effective for annual reporting periods beginning on or after 1 January 2024 with earlier application permitted.

Under the Group's current accounting policy, a financial liability with an equity conversion feature is classified as current or non-current disregarding the impact of the conversion option. The amendments to IAS 1 will result in the equity conversion feature relating to certain of the Group's financial liabilities, impacting the classification of those liabilities. While the Group's assessment of the impact is ongoing, the Group expects that amounts included as non-current in relation to "Convertible Loan Notes" will be reclassified to current liabilities.

The Company has elected to prepare its Parent Company Financial Statements in accordance with Financial Reporting Standard 101 Reduced Disclosure Framework ("FRS 101").

Going concern

The Group and Company Financial Statements have been prepared on a going concern basis. In reaching this conclusion regarding the going concern assumption, the directors considered cash flow forecasts to 28 February 2025 which is more than 15 months from the date of signing of these Financial Statements.

A set of cash flow forecasts ("the base case") have been prepared by management and reviewed by the directors based on revenue and cost forecasts considered reasonable in the light of work done on budgets for the current year and the current shipping markets. In putting together these forecasts particular attention was paid to the following factors:

· The Group's compliance with sanctions put in place as a result of the conflict in the Ukraine has meant additional work reviewing compliance obligations on a regular basis as the laws have been amended but did not have a material effect on trading in FY22/23, nor is it expect to have an impact in FY23/24.

· The level of likely cost inflation, particularly around salaries and energy costs.

· The Group's investment in a new office in Madrid, an acquisition in the US and new trading desks in the Securities business have started well and there is no indication that integration risks are going to be a threat to the forecasts for FY23/24.

· Geopolitical tensions can cause volatility in shipping markets, but if anything, that uncertainty can give rise to additional opportunities for the business to support the industry and clients further. There is therefore no expectation that the current global political tensions will have an adverse impact on trading in FY 23/24.

· The impact of climate change is not expected to have any material impact on the business in the short term and indeed could lead to additional opportunities.

· The impact that the investigation and resulting delay in publishing the annual report and accounts could have on the performance and reputation of the business.

The Directors have considered trading performance during the current year and have concluded that none of these factors are currently likely to have a significantly adverse impact on the Group's future cash flows.

The Group's balance sheet has been strengthened significantly due to the strong trading and disposals of non-core assets during the prior year. As at 28 February 2023 the Group held net bank cash of £6.9 million (2022: net bank debt £9.3 million). As at 30 September 2023 the Group had net bank cash of £5.3 million, following the payment of year end broker bonuses.

During the period, the Group has extended its revolving credit facility ("RCF") with its main bankers, HSBC. The RCF is for £30.0 million plus an accordion limit of £10.0 million and has an initial termination date of November 2025 with two options, subject to lender approval, to extend the term of the facility by 12 and 24 months respectively. Drawdown of the accordion facility is subject to additional credit approval. It has an EBITDA leverage covenant of 2.5x and a minimum interest cover of 4x. At 31 May 2022, 31 August 2022, 30 November 2022 and 28 February 2023 the Group met all financial covenant tests. In addition, there is a further requirement to provide HSBC with the Group's audited Financial Statements within 6 months of the year-end. Due to the delay in completing the audited Financial Statements the Group obtained waivers for this requirement.

The cash flow forecasts in the base case assessed the ability of the Group to operate both within the banking covenants and the facility headroom, and included a number of downside sensitivities on the budgeted revenue, including a reverse stress test scenario. The directors consider revenue as the key assumption in the Group's budget. The cost base is largely fixed or made up of discretionary bonuses, which are directly linked to profitability. Based on two flex scenarios; a revenue decrease of 7.5% and a revenue decrease of 15% from the base case, only very minor mitigations were necessary to meet banking covenants.

A reverse stress test was also performed to ascertain the point at which the covenants would be breached in respect of the key assumption of budgeted revenue decline. This test indicated that the business, alongside certain mitigating actions which are fully in control of the directors, would be capable of withstanding a reduction of approximately 35% in budgeted revenue from the base case assumptions from September 2023 through to November 2024. In light of current trading, forecasts and the Group's performance over FY22/23, the directors assessed this downturn in revenue and concluded the likelihood of such a reduction remote, especially in light of the forward order book of $65 million at the end of September 2023 (£38 million of which is for the financial year ending February 2024 and 2025), such that it does not impact the basis of preparation of the Financial Statements and there is no material uncertainty in this regard.

Basis of consolidation

The consolidated Financial Statements incorporate the Financial Statements of Braemar Plc (previously Braemar Shipping Services plc) and all its subsidiaries made up to 28 February each year or 29 February in a leap year.

Subsidiaries are entities that are controlled by the Group. Control exists when the Group has the rights to variable returns from its involvement with an entity and has the ability to affect those returns through its power over the entity. The results of subsidiaries sold or acquired during the year are included in the accounts up to, or from, the date that control exists. All intercompany balances and transactions have been eliminated in full.

2 Use of estimates and critical judgements

The preparation of the Group's Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amounts of revenues, expenses, assets and liabilities, and the disclosure of contingent liabilities, at the reporting date. Estimates and judgements are continually evaluated based on historical experience and other factors, including expectations of future events that are believed to be reasonable under the circumstances. In the future, actual experience may differ from these estimates and assumptions.

Key sources of estimation uncertainty

The following are the key estimates and assumptions that the Directors have made in the process of applying the Group's accounting policies and that have a significant risk of resulting in material adjustments to the carrying amounts of assets and liabilities within the next financial year.

Impairment of goodwill

Goodwill is tested for impairment on an annual basis, and the Group will also test for impairment at other times if there is an indication that an impairment may exist. Determining whether goodwill is impaired requires an estimation of the value-in-use of the cash-generating units to which these assets have been allocated. The value-in-use calculation estimates the present value of future cash flows expected to arise for the cash-generating units. The key estimates are therefore the selection of suitable discount rates and the estimation of future growth rates which vary between cash-generating units depending on the specific risks and the anticipated economic and market conditions related to each cash-generating unit (see Note 15 for a description of the approach used by management to determine these key values).

As part of determining the value in use of each CGU group, Management has considered the potential impact of climate change on the business performance over the next five years, and the terminal growth rates. While there is considerable uncertainty relating to the longer term and quantifying the impact on a range of outcomes, management considers that environmental-related incremental costs are expected to have a relatively low impact. Recognising that there are extreme but unlikely scenarios, the Group considers that while exposed to physical risks associated with climate change (such as flooding, heatwaves, sea level rises and increased precipitation) the estimated impact of these on the Group is not deemed material.

In addition, the Group is exposed to transitional risks which might arise, for example, from government policy, customer expectations, material costs and increased stakeholder concern. The transitional risks could result in financial impacts such as higher environmentally focused levies (e.g. carbon pricing). While the Group is exposed to the potential financial impacts associated with transitional risks, based on information currently available, these are not deemed to have a significant impact.

Acquisition accounting

Business combinations are accounted for under the acquisition method, based on the fair values of the consideration paid. Assets and liabilities, with limited exceptions, are measured at their fair value at the acquisition date. The Group estimates the provisional fair values and useful lives of acquired assets and liabilities at the date of acquisition. The valuation of acquired intangibles is subject to estimation of future cash flows and the discount rate applied to them. The valuation of the customer-related intangible assets is determined based on an excess earnings methodology while the valuation of the marketing-related intangible asset is based on a royalty savings method. For further details on the acquisition in the year, see Note 14 Business combinations.

Fair value of Cory Brothers deferred and contingent consideration receivable

On 28 February 2022 the Group sold Cory Brothers to Vertom Agencies BV for maximum consideration of £15.5 million. Initial cash proceeds of £6.5 million were received on completion of the transaction, and three contractual "earn-out" payments will be made, being an agreed percentage of the future gross profits of the combined VertomCory business over three subsequent earn out periods. Each of the three earn-out payments are subject to minimum and maximum amounts which are specified in the share purchase agreement. 

The minimum earnout consideration has been classified as deferred consideration receivable. The minimum amount is specified in the SPA and is therefore not an estimate, however an estimate of a discount rate is necessary to discount the deferred consideration receivable. A discount rate of 2.39% was used to calculate the net present value; this was based on the credit risk of Vertom Agencies BV following a credit check performed by management. Deferred consideration receivable is initially recognised at fair value and subsequently measured at amortised cost.

The balance of the earnout consideration, up to the maximum specified in the SPA has been classified as contingent consideration receivable because it is contingent on the future profitability of the combined business. The fair value of the contingent consideration receivable involves two critical estimates: the future profitability of the combined business and the discount rate used to calculate the net present value. The future profitability forecasts are based on a business plan prepared by the combined VertomCory business. Contingent consideration receivable is initially recognised at fair value and subsequently measures at fair value through profit and loss.

See Note 23 for further details, including a sensitivity analysis of the contingent consideration receivable to the discount rate and the assumptions of future profitability.

Recoverability of deferred tax assets

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. See Note 9.

Share option vesting

The fair value determined at the grant date of the equity-settled share-based payments is typically expensed on a straight-line basis over the vesting period, based on the Group's estimate of the number of equity instruments that will eventually vest. At each reporting date, the Group revises its estimate of the number of equity instruments expected to vest as a result of the effect of non-market-based vesting conditions. The impact of the revision of the original estimates, if any, is recognised in profit or loss such that the cumulative expense reflects the revised estimate, with a corresponding adjustment to reserves. See Note 30.

Provision for impairment of trade receivables and contract assets

Trade receivables and contract assets are amounts due from customers in the ordinary course of business. Trade receivables and contract assets are classified as current assets if collection is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current assets.

The provision for impairment of trade receivables and contract assets represents management's best estimate at the Balance Sheet date. A number of judgements are made in the calculation of the provision, primarily the age of the invoice, the existence of any disputes, recent historical payment patterns and the debtor's financial position.

When measuring expected credit losses, the Group uses reasonable and supportable forward-looking information, which is based on assumptions for the future movement of different economic drivers and how these drivers will affect each other. Probability of default constitutes a key input in measuring expected credit losses. Probability of default is an estimate of the likelihood of default over a given time horizon, the calculation of which includes historical data, assumptions and expectations of future market conditions. See Note 22.

Valuation of defined benefit pension scheme

The Group uses an independent actuary to provide annual valuations of the defined benefit pension scheme. The actuary uses a number of estimates in respect of the scheme membership, the valuation of assets and assumptions regarding discount rates, inflation rates and mortality rates.

The membership details are provided by an independent trustee while the valuation of assets is verified by an independent fund manager. The discount rates, inflation rates and mortality rates are reviewed by management at each reporting date. See Note 29.

Wavespec

Fair value of consideration

In the year ended 28 February 2022, the sale of Wavespec, the Group's Engineering Division, completed for a maximum consideration of £2.6 million. The fair value of the consideration is a critical accounting judgement.

The consideration was due to be satisfied by the issuance of a promissory note with a maturity date of 31 March 2026. The fair value of the consideration was based on the net present value of the promissory note (£2.4 million). A discount rate of 2.11% was used to calculate the net present value. The discount rate was made up of two elements, the first being a 5-year BBB+ bond yield of 1.51%, the second being a premium for lack of marketability at 0.60%. A 5-year BBB+ bond yield was used because it matches the maturity of the promissory note and reflects the credit rating of the bank that was expected to provide the letter of credit.

Impairment

As at 28 February 2022 and 28 February 2023, the buyer had not delivered on its obligations to secure the promissory note and therefore management have made a judgement that the promissory note is unlikely to be honoured and consequently the fair value of the consideration is impaired and a credit loss of £2.4 million was recognised within discontinued operations in the year ended 28 February 2022.

Uncertain commission obligations

As described further and set out in Note 28 Provisions, the Directors have made significant judgements in relation to the estimation of the amount of provision to be recognised in relation to uncertain commission obligations.

Key judgements

The following are key judgements that the Group makes, apart from those involving estimations (which are dealt with above), that the Directors have made in the process of applying the Group's accounting policies and that have the most significant effect on the amounts recognised in the Financial Statements.

Revenue recognition

IFRS 15 "Revenue from Contracts with Customers" requires judgement to determine whether revenue is recognised at a "point in time" or "over time" as well as determining the transfer of control for when performance obligations are satisfied.

For Chartering, the Group has defined the performance obligation to be satisfied at the point in time where the negotiated contract between counterparties has been successfully completed, being the discharge of cargoes, and therefore revenue is recognised at this point in time. This is a critical judgement since revenue recognition would differ if the performance obligations were deemed to be satisfied over a time period, or at a different point in time.

Recoverability of defined benefit pension scheme net asset

As a result of actuarial movements during the period, including an increase in the discount rate from 2.65% at 28 February 2022 to 4.90% at 28 February 2023, the UK defined benefit scheme is in an actuarial surplus position at 28 February 2023 (measured on an IAS 19 "Employee Benefits" basis) of £1.1 million (28 February 2022: liability of £2.1 million). The surplus has been recognised on the basis that the Group has an unconditional right to a refund, assuming the gradual settlement of Scheme liabilities over time until all members have left the Scheme. The surplus will be subject to a tax charge on its recovery which the Group does not believe meets the definition of an income tax under IAS 12, and as a result, the surplus has been presented net of the expected taxes payable of £0.6m, at a rate of 35%.

Classification and recognition of specific items

In reporting financial information, the Group presents Alternative Performance Measures ("APMs") which are not defined or specified under the requirements of International Financial Reporting Standards ("IFRS"). The Group believes that these APMs, which are not considered to be a substitute for or superior to IFRS measures, provide stakeholders with additional helpful information and enable an alternative comparison of performance over time.

The Group excludes specific items from its underlying earnings measure. Management judgement is required as to what items qualify for this classification. There can also be judgement as to the point at which costs should be recognised and the amount to record to ensure that the understanding of the underlying performance is not distorted. Specific items include the results from discontinued operations. See Note 10.

Assessment of business combinations

During the year, the Group acquired the entity Madrid Shipping Advisors S.L. For a business combination to exist, the Group must obtain control of a business. To be considered a business, an acquired set of activities and assets must include, at a minimum, an input and a substantive process that together significantly contribute to the ability to create outputs. As part of the transaction, no assets were acquired (such as brand, order book, property, plant and equipment), nor were any liabilities assumed. The entity holds the service contracts for key employees and was a newly incorporated company, set up specifically for the acquisition. The Group has made the judgement that the acquisition did not meet the definition of a business combination as the acquired entity did not meet the definition of a business. The transaction was treated as the recruitment of a broker team, which is consistent with the substance of the arrangement.

Climate?related risks and opportunities

Management have considered the impact of climate-related risks in respect of impairment of goodwill, recoverability of receivables and the recoverability of deferred tax assets in particular and do not consider that climate?related risks have a material impact on any key judgements, estimates or assumptions in the consolidated Financial Statements.

In the prior year, climate change was assessed as part of ongoing discussions of key and emerging risks for the Group and the shipping and energy sectors within which it operates. Consideration of the potential short to medium-term impact of the Environment and Climate Change risk resulted in its inclusion as a Group Principal Risk.

3 Accounting policies

a) Business combinations

The acquisition method of accounting is used to account for all business combinations, regardless of whether equity instruments or other assets are acquired. The consideration transferred for the acquisition of a subsidiary comprises the:

- fair values of the assets acquired;

- liabilities incurred to the former owners of the acquired business;

- equity interests issued by the Group;

- fair value of any asset or liability resulting from a contingent consideration arrangement; and

- fair value of any pre-existing equity interest in the subsidiary.

Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. The Group recognises any non-controlling interest in the acquired entity on an acquisition-by-acquisition basis either at fair value or at the non-controlling interest's proportionate share of the acquired entity's net identifiable assets.

Acquisition-related costs are expensed as incurred.

The excess of the consideration transferred; amount of any non-controlling interest in the acquired entity; and acquisition-date fair value of any previous equity interest in the acquired entity over the fair value of the net identifiable assets acquired is recorded as goodwill. If those amounts are less than the fair value of the net identifiable assets of the business acquired, the difference is recognised directly in profit or loss as a gain on purchase.

Where settlement of any part of cash consideration is deferred, the amounts payable in the future are discounted to their present value as at the date of exchange. The discount rate used is the entity's incremental borrowing rate, being the rate at which a similar borrowing could be obtained from an independent financier under comparable terms and conditions.

Contingent consideration is classified either as equity or a financial liability. Amounts classified as a financial liability are subsequently remeasured to fair value, with changes in fair value recognised in profit or loss.

If the business combination is achieved in stages, the acquisition date carrying value of the acquirer's previously held equity interest in the acquiree is remeasured to fair value at the acquisition date. Any gains or losses arising from such remeasurement are recognised in profit or loss.

Due to the nature of the Group's business, amounts paid or shares issued to sellers are often linked to their continued employment. An assessment is performed to determine whether the amounts are part of the exchange for the acquiree, or should be treated as a transaction separate from the business combination. Transactions that are separate from the business combination are accounted for in accordance the relevant IFRSs which generally results in the amounts being treated as a post-combination remuneration expense.

b) Revenue recognition

Revenue is recognised in accordance with satisfaction of performance obligations. Revenue of the Group consists of:

i) Chartering desks - The Group acts as a broker for several types of shipping transactions, each of which gives rise to an entitlement to commission:

Deep sea tankers, specialised tankers and gas, dry cargo and offshore:

- for single voyage chartering, the contractual terms are governed by a standard charterparty contract in which the broker's performance obligation is satisfied when the cargo has been discharged according to the contractual terms;

- for time charters, the commission is specified in the hire agreement and the performance obligation is spread over the term of the charter at specified intervals in accordance with the charter party terms;

ii) Risk Advisory desks 

Securities:

- for income derived from commodity broking, the commission is recognised when a binding contractual arrangement is entered into between the two parties, at which point, the Group has fulfilled its performance obligation.

iii) Investment Advisory 

Financial:

- income comprises retainer fees and success fees generated by corporate finance-related activities. Revenue is recognised in accordance with the terms agreed in individual client terms of engagement. Recurring monthly retainers are recognised in the month of invoice and success fees are recognised at the point when the performance obligations of the particular engagement are fulfilled.

Sale and purchase:

- in the case of second-hand sale and purchase contracts, the broker's performance obligation is satisfied when the principals in the transaction complete on the sale/purchase and the title of the vessel passes from the seller to the buyer;

- with regard to newbuilding contracts, the commission is recognised when contractual stage payments are made by the purchaser of a vessel to a shipyard which in turn reflects the performance of services over the life of the contract;

- for income derived from providing ship and fleet valuations, the Group recognises income when a valuation certificate is provided to the client and the service is invoiced.

iv) Logistics (a discontinued operation):

- - the performance obligation for agency income is satisfied at the point in time when the vessel sails from the port. For forwarding and logistics income the performance obligation is satisfied when the goods depart from their load location. Where the Group acts as a principal rather than as agent, the revenue and costs are shown gross.

Dividend income from investments is recognised when the right to receive payment is established.

c) Government grants

Government grants are netted against the cost incurred by the Group. When retention of a government grant is dependent on the Group satisfying certain criteria, it is initially recognised as deferred income and released to the Income Statement once the criteria for retention have been satisfied. See Note 5.

d) Foreign currencies

Transactions and balances

Transactions in currencies other than sterling are recorded at the rates of exchange prevailing on the date of the transaction. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation at year-end exchange rates of monetary assets and liabilities denominated in foreign currency are recognised in the Income Statement.

In order to hedge its exposure to certain foreign exchange risks, the Group enters into derivative financial instrument contracts, mainly forward foreign currency exchange contracts which are designated as cash flow hedges (see Note 3(m)). For a qualifying hedge relationship, the fair value gain or loss on the hedging instrument is recognised as part of Revenue when the underlying transaction is recognised in accordance with the Revenue recognition policy set out above.

Translation to presentation currency

The presentational currency of the Group is sterling. Assets and liabilities of overseas subsidiaries, branches and associates are translated from their functional currency into sterling at the exchange rates ruling at the Balance Sheet date. Trading results are translated at the average rates for the period. Exchange differences arising on the consolidation of the net assets of overseas subsidiaries are recognised through other comprehensive income in the foreign currency translation reserve (see Note 32).

On disposal of a business, the cumulative exchange differences previously recognised in the foreign currency translation reserve relating to that business are transferred to the Income Statement as part of the gain or loss on disposal. The Group finances overseas investments partly through the use of foreign currency borrowings in order to provide a net investment hedge over the foreign currency risk that arises on translation of its foreign currency subsidiaries. For effective hedge relationships, the gain or loss on the hedging instrument is recognised in equity through other comprehensive income.

e) Taxation

The taxation expense represents the sum of the current and deferred tax.

The tax currently payable is based on taxable profit for the year. Taxable profit differs from net profit as reported in the Income Statement because it excludes items of income and expense that are taxable or deductible in other years and it further excludes items that are never taxable or deductible. The Group and Company's liability for current tax is calculated using rates that have been enacted or substantively enacted by the Balance Sheet date.

Deferred income tax is provided in full, using the liability method, on temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated Financial Statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is also not accounted for if it arises from initial recognition of an asset or liability in a transaction other than a business combination that, at the time of the transaction, affects neither accounting nor taxable profit or loss and does not give rise to equal taxable and deductible temporary differences. Deferred income tax is determined using tax rates (and laws) that have been enacted or substantively enacted by the end of the reporting period and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred tax assets and liabilities are offset where there is a legally enforceable right to offset current tax assets and liabilities and where the deferred tax balances relate to the same taxation authority. Current tax assets and tax liabilities are offset where the entity has a legally enforceable right to offset and intends either to settle on a net basis, or to realise the asset and settle the liability simultaneously.

Current and deferred tax is recognised in profit or loss, except to the extent that it relates to items recognised in other comprehensive income or directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in equity, respectively.

f) Goodwill

Business combinations are accounted for using the acquisition method. The goodwill recognised as an asset by the Group is stated at cost less any accumulated impairment losses.

On the acquisition of a business, fair values are attributed to the net assets (including any identifiable intangible assets) acquired. The excess of the consideration transferred, any non-controlling interest recognised and the fair value of any previous equity interest in the acquired entity over the fair value of net identifiable assets acquired is recorded as goodwill. Acquisition-related costs are recognised in the Income Statement as incurred in accordance with IFRS 3. 

In relation to acquisitions where the fair value of assets acquired exceeds the fair value of the consideration, the excess fair value is recognised immediately in the Income Statement as a gain on purchase.

On the disposal of a business, goodwill relating to that business remaining on the Balance Sheet is included in the determination of the profit or loss on disposal. As permitted by IFRS 1, goodwill on acquisitions arising prior to 1 March 2004 has been retained at prior amounts and is tested annually for impairment.

g) Intangible assets

Computer software

The Group capitalises computer software at cost. It is amortised on a straight-line basis over its estimated useful life of up to four years.

Development costs

The Group capitalises internally generated development costs when it is able to demonstrate:

- the technical feasibility of completing the intangible asset so that it is subsequently available for use;

- that there is a clear intention that the intangible asset would be completed and then used;

- that it is able to use the intangible asset;

- that future economic benefits are probable;

- that there are adequate technical, financial and other resources to complete the development and to use the asset; and the expenditure attributable to the intangible asset during its development can be reliably measured.

The Group amortises development on a straight?line basis over its estimated useful economic life of up to three years. See Note 16.

Research costs are expensed as incurred.

Other intangible assets

Intangible assets acquired as part of a business combination are stated in the Balance Sheet at their fair value at the date of acquisition less accumulated amortisation and any provision for impairment. The amortisation of the carrying value of the capitalised forward order book and customer relationships is charged to the Income Statement over an estimated useful life, which is between four months to twelve years. The amortisation in respect of capitalised brand assets is expensed to the Income Statement over an estimated useful life, which is between three and twelve years.

h) Property, plant and equipment

Property, plant and equipment are shown at historical cost less accumulated depreciation and any provision for impairment.

Depreciation is provided at rates calculated to write off the cost, less estimated residual value of each asset, on a straight-line basis over its expected useful life as follows (except for long and short leasehold interests which are written off against the remaining period of the lease):

Motor vehicles - three years

Computer equipment - four years

Fixtures and equipment - four years

i) Leases

The Group as a lessee

The Group has various lease arrangements for properties, and other equipment. At inception of a lease contract, the Group assesses whether the contract conveys the right to control the use of an identified asset for a certain period of time and whether it obtains substantially all the economic benefits from the use of that asset, in exchange for consideration. The Group recognises a lease liability and a corresponding right-of-use asset with respect to all lease arrangements in which it is a lessee, except low-value leases and short-term leases of 12 months or less, costs for which are recognised as an operating expense within the income statement on a straight-line basis.

A right-of-use asset is capitalised on the Balance Sheet at cost, comprising the amount of the initial measurement of the lease liability and lease payments made at or before the commencement date, plus any initial direct costs incurred in addition to an estimate of costs to remove or restore the underlying asset. Where a lease incentive is receivable, the amount is offset against the right-of-use asset at inception. Right-of-use assets are depreciated using the straight-line method over the shorter of the estimated life of the asset or the lease term.

The lease liability is initially measured at the present value of future lease payments. Interest expense is charged to the Consolidated Income Statement over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be determined, the lessee's incremental borrowing rate is used, being the rate that the lessee would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions. Generally, the interest rate implicit in the lease is not readily determinable, as such the incremental borrowing rate is used to discount future lease payments.

For the Group, lease payments generally comprise the following:

? Fixed payments, less any lease incentives receivable;

? Variable payments that are based on an index or rate; and

? Payments to be made under extension options which are reasonably certain to be exercised.

Lease payments made are apportioned between an interest charge and a capital repayment amount which are disclosed within the financing activities and the operating activities sections of the Consolidated Statement of Cash Flows respectively. When an adjustment to lease payments based on an index takes effect, the liability is remeasured with a corresponding adjustment to the right-of-use asset.

Contracts entered into by the Group have a wide range of terms and conditions but generally do not impose any additional covenants. Several of the Group's contracts include indexation adjustments to lease payments in future periods which are not reflected in the measurement of the lease liabilities at 28 February 2023. Many of the contracts entered into by the Group include extension or termination options which provide the Group with additional operational flexibility. If the Group considers it reasonably certain that an extension option will be exercised or a termination option not exercised, the additional period is included in the lease term.

A modification to a lease which changes the lease payment amount (e.g. due to a renegotiation or market rent review) or amends the term of the lease, results in a reassessment of the lease liability with a corresponding adjustment to the right-of-use asset.

The Group as a lessor

The Group classified leases as either operating or finance leases based on the substance of the arrangement. At commencement of a finance lease, a receivable is recognised at an amount equal to the Group's net investment in the lease. Finance income is recognised reflecting a constant periodic rate of return on the net investment in the lease. Lease payments from operating leases are recognised as income on a straight-line basis.

j) Investments

Investments in associates and joint ventures where the Group has joint control or significant influence are accounted for under the equity method. Investments in associates are initially recognised in the Consolidated Balance Sheet at cost. Subsequently associates are accounted for under the equity method, where the Group's share of post-acquisition profits and losses and other comprehensive income is recognised in the Income Statement and Statement of Comprehensive Income.

Profits and losses arising on transactions between the Group and its associates are recognised only to the extent of unrelated investors' interests in the associate. The investor's share in the associate's profits and losses arising from these transactions is eliminated against the carrying value of the associate.

Where the Group's share of the associate's identifiable net assets is greater than the cost of investment, a gain on purchase is recognised in the Income Statement and the carrying value of the investment in the Consolidated Balance Sheet is increased.

When the Group disposes of shares in associates or joint ventures the Group recognises a profit or loss on disposal based on the net proceeds less the weighted average cost of the shares disposed of. On disposal the Group reclassifies foreign exchange amounts previously recognised in other comprehensive income relating to that reduction in ownership interest if that gain or loss would be required to be reclassified to profit or loss on the disposal of the related assets or liabilities.

The most recent Financial Statements of an associate are used for accounting purposes unless it is impractical to do so. Where the Group and an associate have non-coterminous reporting dates the associate's full-year accounts will be used for the purposes of the Group's reporting at 28 February with adjustments made for any significant transactions or events.

Investments where the Group has no significant influence are held at fair value, with movements in fair value recorded in profit and loss.

k) Impairment

The carrying amount of the Group's assets, other than financial assets within the scope of IFRS 9 and deferred tax assets, are reviewed for impairment as described below. If any indication of impairment exists, the asset's recoverable amount is estimated. The recoverable amount is determined based on the higher of value-in-use calculations and fair value less costs to sell, which requires the use of estimates. An impairment loss is recognised in the Income Statement whenever the carrying amount of the assets exceeds its recoverable amount.

Goodwill is reviewed for impairment at least annually. Impairments are recognised immediately in the Income Statement. Goodwill is allocated to cash-generating units for the purposes of impairment testing.

The carrying value of intangible assets with a finite life is reviewed for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. The carrying values of other intangible assets are reviewed for impairment at least annually or when there is an indication that they may be impaired.

Right-of-use assets are reviewed for impairment to account for any loss when events or changes in circumstances indicate the carrying value may not be fully recoverable.

Where there is objective evidence that the investment in an associate has been impaired, the carrying amount of the investment is tested for impairment in the same way as other non-financial assets.

Where an impairment loss subsequently reverses, the carrying amount of the assets, with the exception of goodwill, is increased to the revised estimate of its recoverable amount. This cannot exceed the carrying amount prior to the impairment charge. An impairment recognised in the Income Statement in respect of goodwill is not subsequently reversed.

l) Deferred and contingent consideration receivables

Contingent consideration receivable is initially recognised at fair value and is subsequently remeasured at its fair value at each Balance Sheet date. The resulting gain or loss is recognised immediately in the Income Statement. Contingent consideration receivable is classified as level 3 in accordance with the fair value hierarchy specified by IFRS 13. Deferred consideration is initially measured at its fair value and subsequently measured at amortised cost less provision for impairment. See Notes 23 and 24.

m) Derivative financial instruments and hedging

Derivatives are initially recognised at fair value and are subsequently remeasured at their fair value at each Balance Sheet date with gains and losses recognised immediately in the Income Statement unless hedge accounting is applied. Recognition of the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if it is, the nature of the item being hedged. Changes in the fair value of derivatives that do not qualify for hedge accounting are recognised immediately in the Income Statement. The Group designates derivatives that qualify for hedge accounting as a cash flow hedge where there is a high probability of the forecast transactions arising. The effective portion of changes in the fair value of these derivatives is recognised in equity. The gain or loss on derivative instruments not designated in hedging relationships and relating to the ineffective portion of derivatives designated in hedging relationships is recognised immediately in the Income Statement within finance costs or income. Amounts accumulated in equity are recycled to the Income Statement at the same time as the gains or losses on the hedged items. When a forecast transaction is no longer expected to occur, the cumulative gains or losses that were reported in equity are immediately transferred to the Income Statement.

To qualify for hedge accounting, the terms of the hedge must be clearly documented at inception and there must be an expectation that the derivative will be highly effective in offsetting changes in the cash flow of the hedged risk. Hedge effectiveness is tested throughout the life of the hedge and if at any point it is concluded that the relationship can no longer be expected to remain highly effective in achieving its objective, the hedge relationship is terminated.

The critical terms of the hedging instruments match the hedged transactions r in relation to currency, timing and amounts, meaning there is a clear economic relationship between the hedging instrument and hedged item as required under IFRS 9. Thereby, management qualitatively demonstrates that the hedging instrument and the hedged items will move equally in the opposite direction.

When a hedging instrument expires or is sold, terminated or exercised, or the entity revokes designation of the hedge relationship but the hedged forecast transaction is still expected to occur, the cumulative gain or loss at that point remains in equity and is recognised in accordance with the above policy when the transaction occurs.

The fair value of derivative contracts is based either directly or indirectly on market prices at the Balance Sheet date.

Financial assets and liabilities are classified in accordance with the fair value hierarchy specified by IFRS 13. See Note 24.

n) Trade receivables and contract assets

Trade receivables and contract assets are initially recognised at fair value (less transaction costs) and subsequently measured at amortised cost.

At the Balance Sheet date, there may be amounts where invoices have not been raised but performance obligations have been satisfied, and these are recognised as contract assets.

Specific provision is made where there is evidence that the balances will not be recovered in full. A provision for expected credit losses is made for trade receivables and contract assets using the simplified approach. A provision matrix is used to calculate an expected credit loss as a percentage of carrying value by age. The percentages are determined based on historical credit loss experience as well as forward-looking information. Expected credit loss provisions are made for other receivables based on lifetime expected credit losses using a model that considers forward-looking information and significant increases in credit risk.

Trade and other receivables are non-interest bearing and generally on terms payable within 30 to 90 days.

o) Cash and cash equivalents

Cash and cash equivalents included in the Balance Sheet comprise cash in-hand, short-term deposits with an original maturity of three months or less and restricted cash.

Cash and cash equivalents included in the Cash Flow Statement include cash and short-term deposits. Bank overdrafts are included in the Balance Sheet within short-term borrowings.

p) Provisions

Provisions are recognised when the Group has a present obligation (legal or otherwise) as a result of a past event and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation and a reliable estimate can be made of the amount of the obligation. If material, the provisions are discounted using an appropriate current post-tax interest rate.

Short-term provisions for long service leave expected to be settled wholly within 12 months of the reporting date are measured at the amounts expected to be paid when the liabilities are settled.

The provision for long service leave not expected to be settled within 12 months of the reporting date is measured at the present value of expected future payments to be made in respect of services provided by employees up to the reporting date. Consideration is given to expected future wage and salary levels, experience of employee departures and periods of service. Expected future payments are discounted using market yields at the reporting date on corporate bonds with terms to maturity and currency that match, as closely as possible, the estimated future cash outflows.

q) Share-based payments

The Group operates a number of equity-settled share-based payment schemes.

No awards may be granted under the schemes set out below which would result in the total number of shares issued or remaining issuable under all of the schemes (or any other Group share schemes), in the ten-year period ending on the date of grant of the option, exceeding 10% of the Company's issued share capital (calculated at the date of grant of the relevant option).

The Group may provide a net settlement feature, whereby it withholds the number of equity instruments equal to the monetary value of the employee's tax obligation arising from the exercise (or vesting) of the award if the total number of shares that otherwise would have been issued to the employee. The Group has no contractual obligation to provide a net settlement option, and therefore the award is still accounted for as an equity settled award in full and the value of the shares foregone by the employee is accounted for as a deduction from equity.

The net cost of the shares acquired for the shares held by the ESOP and the EBT are a deduction from shareholders' funds and represent a reduction in distributable reserves. Note 31 provides detail on the ESOP and the EBT and movements in shares to be issued.

Share Option Scheme

During the year the Company operated the Braemar Shipping Services Plc Savings-Related Share Option Scheme 2014 (the "SAYE Scheme") and the Braemar Shipping Services Plc International Savings-Related Share Option Scheme 2019 (the "International SAYE Scheme"). Options are granted at up to a 20% discount to the prevailing market price and entitle employees to purchase shares in the Company at a fixed price subject to continued employment. The fair value of share options granted under the SAYE schemes is determined using a binomial pricing model. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures.

Deferred Bonus Plan ("DBP")

The Company adopted a Deferred Bonus Plan in May 2020 (the "2020 DBP"), pursuant to which future discretionary bonus awards will be granted to staff including executive directors. Awards under the New DBP may be linked to an option granted under the new Braemar Company Share Option Plan 2020, which was also adopted by the Company in May 2020 (the "2020 CSOP"). Where an employee receives a linked award under the 2020 DBP, if the Company's share price rises over the vesting period, the 2020 CSOP award can be exercised with the value of shares delivered on the vesting of the 2020 DBP award being reduced by the exercise gain on the 2020 CSOP award. Awards under the 2020 DBP and the 2020 CSOP may be settled by the issue of new shares of by way of transfer of shares from the ESOP. Historic practice has been to settle via the transfer of shares from the ESOP and it is the current intention to continue to operate in this manner.

The number of awards granted under the Deferred Bonus Plan each year is related to the profits generated in the previous year. The cost of the award is therefore expensed from the beginning of that profit period until the vesting date which is usually three years after the date of award and is subject to continued employment. Awards made to new joiners are expensed over the period from date of joining to date of vesting. Their fair value is estimated based on the share price at the time of grant less the expected dividend to be paid during the vesting period. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures.

Restricted Share Plan ("RSP")

During the year ended 28 February 2015, the Company established a Restricted Share Plan ("RSP"). This scheme was set up to grant awards to certain key staff to try to retain them following the merger between Braemar and ACM Shipping Group Plc, but it can also be used where the Remuneration Committee considers it necessary to secure the recruitment of a particular individual. Executive directors of the Company are not eligible to participate in the RSP. RSP awards are made in the form of a nil cost option and there are no performance criteria other than continued employment. Their fair value is estimated based on the share price at the time of grant less the expected dividend to be paid during the vesting period. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures.

Long Term Incentive Plan ("LTIP")

The Company also operates an LTIP, which was approved by shareholders and adopted in 2014. LTIP awards under this plan take the form of a conditional right to receive shares at nil cost. The awards normally vest over three years and are typically subject to a performance condition such as earnings per share ("EPS") or Total Shareholder Return ("TSR"), a market-based condition.

The fair value of awards with the EPS condition are non-market conditions and their fair value is estimated based on the share price at the time of grant less the expected dividend to be paid during the vesting period. The fair value of awards containing market conditions is determined using Monte Carlo simulation models. The number of awards which are expected to vest is estimated by management based on levels of expected forfeitures and the expected outcome of the EPS condition. For awards subject to market conditions, no adjustment is made to reflect the likelihood of the market condition being met nor the actual number of awards which lapse as a result of the condition not being met.

r) Commissions payable

Commissions payable to co-brokers are recognised in trade payables due within one year on the earlier of the date of invoicing or the date of receipt of cash.

s) Long-term employee benefits

The Group has the following long-term employee benefits:

i) Defined contribution schemes

The Group operates a number of defined contribution schemes. Pension costs charged against profits in respect of these schemes represent the amount of the contributions payable to the schemes in respect of the accounting period. The assets of the schemes are held separately from those of the Group within independently administered funds. The Group has no further payment obligations once the contributions have been paid.

ii) Defined benefit schemes

The Group operates a defined benefit scheme, the ACM Staff Pension Scheme, with assets held separately from the Group. The cost of providing benefits under the scheme is determined using the projected unit credit actuarial valuation method which measures the liability based on service completed and allowing for projected future salary increases and discounted at an appropriate rate.

The current service cost, which is the increase in the present value of the retirement benefit obligation resulting from employee service in the current year, and gains and losses on settlements and curtailments, are included within operating profit in the Income Statement. The unwinding of the discount rate on the scheme liabilities which is shown as a net finance cost and past service costs are presented and recognised immediately in the Income Statement.

The pension asset or liability recognised on the Balance Sheet in respect of this scheme represents the difference between the present value of the Group's obligations under the scheme and the fair value of the scheme's assets. Actuarial gains or losses and return on plan assets net of tax, excluding interest, are recognised in the period in which they arise within the Statement of Comprehensive Income.

When the defined benefit plan is in a surplus, the asset is recognised at the lower of the surplus and the asset ceiling, less any associated costs, such as taxes payable.

iii) Other long-term benefits

The current service cost of other long-term benefits resulting from employee services in the current year is included within the Income Statement. The unwinding of any discounting on the liabilities is shown in net finance costs.

t) Borrowings and loan notes

Arrangement costs for loan facilities are capitalised and amortised over the life of the debt at a constant rate.

Finance costs are charged to the Income Statement, based on the effective interest rate of the associated external borrowings and debt instruments.

The convertible loan notes are considered to be a financial liability host with an embedded derivative convertible feature which is required to be separated from the host. The Group has an accounting choice to record the instrument in its entirety at fair value through profit and loss but has not chosen to apply this treatment. Instead, the financial liability host is recognised as a euro liability initially recognised at fair value and prospectively accounted for applying the effective interest rate method. The derivative conversion feature is recognised at fair value through profit and loss. Where there are conversion options that can be exercised within one year the liability is recognised as current.

Modification of terms of financial liability

When the terms of an existing financial liability are modified, management will consider both quantitative and qualitative factors to assess whether the modification is substantial. In the case that the modification of the terms of existing financial liability is considered to be substantial, the modification shall be accounted for as an extinguishment of that financial liability and the recognition of a new financial liability. If the modification is not considered substantial, then the existing financial liability is remeasured in accordance with its original classification and any gain or loss is recognised immediately in the Income Statement.

u) Specific items

Specific items are significant items considered material in size or nature, including acquisition and disposal-related gains and losses. These are disclosed separately to enable a full understanding of the Group's ongoing financial performance.

v) Non-current assets held for sale and discontinued operations

A non-current asset or a group of assets, such as a disposal group, is classified as held for sale if its carrying amount will be recovered principally through sale rather than through continuing use, it is available for immediate sale and sale is highly probable within one year.

On initial classification as held for sale, non-current assets and disposal groups are measured at the lower of previous carrying amount and fair value less costs to sell with any adjustments taken to profit or loss.

A discontinued operation is a component of the Group's business that represents a separate line of business or geographical area of operations that has been disposed of or is held for sale, or is a subsidiary acquired exclusively with a view to resale. Classification as a discontinued operation occurs upon disposal or when the operation meets the criteria to be classified as held for sale, if earlier. When an operation is classified as a discontinued operation, the comparative Income Statement is restated as if the operation has been discontinued from the start of the comparative period.

w) Contingent assets

Contingent assets are not recognised but are disclosed where an inflow of economic benefits is probable.

4 Segmental information and revenue

a) Business segments

Following the simplification of the Group's activities and the way in which information is now presented to the Group's Chief Operating Decision Maker, the Group's operating segments are Chartering, Investment Advisory and Risk Advisory. Previously the Group's operating segments were based on a Divisional structure of Shipbroking, Financial, Logistics and Engineering Divisions. The Logistics and Engineering Divisions were sold in the prior year and are presented as discontinued operations in the comparative period. 

The Chief Operating Decision Maker is considered to be the Group's board of Directors. Each of Chartering, Investment Advisory and Risk Advisory are managed separately, and the nature of the services offered to clients is distinct between the segments. The Chartering segment includes the Group's shipbroking business, Risk Advisory includes the Group's regulated securities business and Investment Advisory focuses on transactional services. 

The segmental analysis is consistent with the way the Group manages itself and with the format of the Group's internal financial reporting. The board considers the business from both service line and geographic perspectives. A description of each of the lines of service is provided in the Operating and Financial Review. The Group's main geographic markets comprise the UK, Singapore, the US, Australia, Germany and the Rest of the World. The Group's geographical markets are determined by the location of the Group's assets and operations.

Central costs relate to board costs and other costs associated with the Group's listing on the London Stock Exchange. All segments meet the quantitative thresholds required by IFRS 8 as reportable segments.

Underlying operating profit is defined as operating profit for continuing activities before restructuring costs, gain on disposal of investment and acquisition and disposal-related items.

The segmental information provided to the board for reportable segments for the year ended 28 February 2023 is as follows:

Prior year figures have been restated in line with the current segment definitions.

Geographical segment - by origin

The Group manages its business segments on a global basis. The operation's main geographical area and also the home country of the Company is the United Kingdom.

Geographical information determined by location of customers is set out below: